Three reasons to use your credit cards as a cash flow tool

As Malaysia’s economy gradually recovers from the hit of Covid-19 pandemic, Malaysian consumers are seen to rely more on contactless payment as the ‘new norm’. Based on a study done by Visa, at least 70% of Malaysians currently choose digital payment, and in the last 5 years, principal credit cards in circulation have risen by 26 per cent between January 2015 and January 2020 – increasing from 7.2 million credit cards to 9.1 million. In the meantime, credit card transactions also increased by almost 42 per cent from 2015 to 2019.

The main reason why most of us own and use personal credit cards are for the rewards - miles, points or cash back - something all of us are familiar with. However, businesses, on the other hand, use these handy cards for an often overlooked benefit –  they are pre-approved lines of credit at your disposal. Credit cards are issued by banks and financial institutions as an easy way for cardholders to get instant access to funds, or to put purchases on credit terms. While it is true that credit cards can come with very high interest rates, there is a significant interest-free window that can be leveraged on – up to 60 days, to be exact. This is beneficial for individuals who are looking to pay off big-ticket expenses, but especially so for businesses, with many of their expenses being large and recurring in nature. 

Essentially, this means that businesses can view their credit cards as a short-term financing option that provides access to cash, similar to micro-loans and overdrafts – but way more convenient and are faster to obtain than any of these other financing options. Here are three reasons why:

1. No collateral or paperwork required

With small business loans or overdrafts, collateral is often required – assets such as your inventory or equipment that banks hold as insurance should you fail to fulfil your monthly repayments.

However, with the pre-approved line of credit on your existing credit card, there is no need for additional collateral or administrative documents – making this the quickest way to get a short-term loan, by simply putting your purchases on the existing credit cards you already have in your back pockets. This gives you instant access to credit, without any long waiting times or cumbersome administrative processes. 

2. Interest-free short-term financing

Small business loans and overdrafts are pegged with interest rates ranging upwards to 18% per annum, exclusive of administrative and annual fees that are imposed on top of the interest.

With credit cards, you have an interest-free period of up to almost 2 months starting from the time you make a charge to your credit card, up to the end of the repayment period. This helps greatly with companies dealing with volatile cash flow or seasonal demand cycles, as well as businesses looking to tap into additional funds for growth.

3. Consolidation of expenses

With multiple purchases and invoices in a month, small businesses usually require hours of manual administrative work every month to ensure proper and accurate reconciliation. This is made even more cumbersome with some payments that can only be made via cheques or bank transfers when the recipient does not accept credit cards.

With all payments made via credit card, payments are compiled on just one credit card statement. This simplifies your accounting processes as all payments are reflected in one location – allowing for simplified reconciliation that requires less time and reduces human error.

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With these benefits, then why aren’t more businesses making full use of their corporate credit cards to streamline their accounting process? This is because most business payments such as commercial rent, supplier payments or even salaries are still only made payable via cheques or bank transfers, as many of these recipients are not willing to accept credit cards because of the fees or operational set up required.

CardUp, however, is here to remove this blocker. Our platform allows expenses such as rent, payroll, supplier invoices and more to be put on your credit cards, even if they do not accept credit cards. This allows you to use your credit cards for your large, recurring expenses fully reaping the benefits of your credit cards.

Schedule your first business payment with CardUp, and make the most of your corporate credit cards today.